tv Bloomberg Markets Asia Bloomberg January 25, 2018 8:00pm-11:00pm EST
>> friday, 9:00 a.m. in hong kong. i am rishaad, this is "bloomberg markets: asia." ♪ currencies front and center. the dollar rising on president trump's coffer strength. the yen down a second day. inflation stalling in japan. the bank of japan's 2% target seems out of reach. optimistic signals in china.
the economy is maintaining last year's momentum. let us have a look at what is going on with regard to the moon out there. we have records for -- mood out there. the dow's climbing. it's always we have so far for the asian equity session's. -- sessions. 225 of 0.1%. we are showing a contraction there. that came days after the bank of korea itself raised growth forecasts looking at 2018. overall, the dollar's strength is climbing a little bit compared to its japanese counterpart. it is waiting into the unusual theic discussion, saying strong dollar is favored after endorseduchin an
a weaker dollar. that prevented a fallback. let us have a look at what this chart says. we have industrial profits coming out. the chinese economy is a tale of two sectors. the diversions between large and small companies is deepening. we have the pmi's for the large companies in indigo. you can see how they have been expanding under the contraction for small ones, and that is reflected in the stock prices. blue,e the china index in showing the declines over the past year and a half. you have the csi 300, which has a lot of the large caps. it is a big move to the upside. small caps being left behind in china. let us get an idea with what is going on first word news wise. deflation stuff -- inflation stalled in december. notovember,
reaching the 2% target. the bojrts the view will keep the program unchanged. nearly half of 43 economists surveyed by bloomberg expects some findings this year. white house officials say president trump is prepared to sign an immigration law that would give a pathway to citizenship for as many as 1.8 million immigrants brought to the u.s. as children. they will cast the offer as a concession to democrats. at the same time, the president would ask congress for $25 billion trust funds to pay for his southern border wall. early indicators from china suggest the economy is maintaining last year's momentum. sales managers are the most popular since july. financial experts are more optimistic. manufacturing is improving for the first time in four months. the outlook is slightly worse for smaller enterprises and sentiment in the steel business
has been deteriorating. the u.k. government is being muchit is facing too turbulence to prepare effectively for brexit. the institute for government theks issues are competing ability to pass legislation and deal with challenges at home and abroad. two thirds of the ministers have moved jobs since the election. areas, i am these positive we will be able to get a good arrangement for the future. an arrangement which is a comprehensive trade agreement for the united kingdom with the european union. the reason i believe that we will be able to come to that good arrangement is because what i see talking to other people is we will be pragmatic about this. it is because it is the benefit of the eu as well as the u.k. a veteran investor told the world economic forum the trump
administration is a danger to the world. use of the president is risking war with north korea. soros says he is expecting a democratic win fight in the midterm election and that the trump administration will be gone in 2020. >> clearly, i consider the trump administration a danger to the world, but i regard it as a purely temporary and him and phenomenon that will disappear in 2020 or sooner. >> global news 24 hours a day. powered by more than 2,700 journalists and analysts in more than 120 countries. i'm tom mackenzie. this is bloomberg. rishaad: headlines coming out. the finance minister in japan talking about a group not targeting currency rates. fxics rates, not fixed -- rates not fix. also trump talking about a specific partnership.
he would join if you could get a better deal. trump waiting into the currency markets, wading into that debate over the dollar saying he favored a strong dollar after one day after his treasury secretary endorsed a different currency. mario draghi says someone was not playing by the rules. >> the exchange rate has moved reasons,ecause of namely the improvement in the economy. at have tor reasons th do with communication, but not by the ecb, but by someone else. notthis communication does -- not the ecb communication, but this someone else communication -- [laughter] >> does not comply with the agreed terms of reference. rishaad: no comfort for the
dollar, saying the robust growth justifies a stronger euro, pushing it to a three-year high ahead of trump's comments. of prognosise ceo advisory. it is rare that we see people laundering in public. when you heard those comments, is it aaghi, rarely, source of amusement, is it? >> i suppose they can do it. i love mario draghi, with his slow italian accent. he says someone is not playing by the rules. down to fibonacci. it was very nice. [laughter] rishaad: on a serious note, what is going on? andrew: i imagine there are three things going on. it is like trump to contradict. whom do you believe? i will stay with the secretary
of treasury, basically. again, this is good for the united states. the second point, it is good for the united states but it gives light -- it is china that is the currency manipulator. rishaad long last we let go of china and now we have the united states as a manipulator. mario draghi comes in and says it does not -- what i thought he might be saying is, it does not help the markets if you have two contradictory statements about what is happening to the currency. it has nothing to do with what i say. it has to do with what the market is doing. some of those comments, who cares about this? the year 2020, this might not be around. rishaad: you cannot be certain of that. andrew: yeah. they have had enough of them collectively. he will cry all the way to the
bank. what are you going to do to me?i do not like trump so i will say it. rishaad: with the way the dollar has depreciated, you could argue it has been far too fast. sterling, 5% down. up 6%.an sudden to have longevity? --rew: barry did it four t they already raised the interest rates. the chairman says i will continue increasing interest rates. clearly, this would be increasing so it would be revaluing. . upping the u.s. dollar and then bringing it down. what is the problem? the inherent fear that as domestic interest rates are going up, this is going to change the valuation of all financial assets. they will come down. again, this will keep changing
the equity market. rishaad: it has largely been priced down. andrew: clearly not. it shows you why effectively people are saying no, i do not want greenbacks. when people do not want the greenback, it is not that they take the box of cash to the banking trade it for something else, they move out of these assets. no clear evidence of that yet. that is the most sensible explanation. if they shut down and someone had against my head and they said had you expect the interest rates are going up, i will say that is the explanation. the inherent fear that equity well,e bond markets -- the bond markets are significantly overpriced. in some ways it is yet to come down. the stock market is massively overpriced in technical terms. price-earnings, in terms of relative strength. all of it. i looked at my favorite bloomberg screen.
it is reading off the scale kind of. there is your explanation. the question is, what do we do about it. ask me. [laughter] rishaad: you have asked yourself. go on. i have a feeling you prepared your answer. andrew: this is one of the easiest interviews you have ever done. actually, you can go outside and have a cup of coffee. what do we do? i stick to equity markets and i feel much more comfortable. agents, ie smaller think they will continue to do very well as they did last year. i will keep off the bond market, specifically the united states bond market. i like some of the currencies that can be played up against china. one is the aussie. it is doing brilliantly. there are a few things that you can go in buy on the basis for what you actually sing. i am not very keen of china yet. i still feel a little bit uncomfortable because the monetary tightening has a little bit to go.
andrew, please stay with us and ask yourself some more questions. [laughter] rishaad: later on the program, i someone toaking to give us his thoughts on the rhetoric anin davos. user interactive function, to be go. -- use our interactive function tv to be part of the conversation. perhaps this is an andrew question. if he asks himself enough. this is versus covers only -- this is for subscribers only. check it out. tv . ♪
relatively high taxpaying industry and now we converged with other countries. they did a good job of widening the base, moving deductions, and having a rate that would be a common rate for everyone. they equalized the consequences of keeping money overseas versus bringing it home.i think it has made the system more sensible . i am work in concert a flattening yield curve. it? is 30 basis points. the wall of money that is sitting out there is still quite substantial. for us to get to a 360, you wou ld have to see behavior changes by the bank of japan and the ecb. i do not anticipate that kind of rapid change yet. back.d: we're your thoughts on this? andrew: we are not going to go to 360 very quickly and the wall of money. i do not like commenting on other people's interviews.
rishaad: the general theme. andrew: 100 basis points. we will see one of the worst bear markets and bonds ever. the world theme, we are supposed to be moving together. sort of macro economically and in a metaphysical sense. the fed is increasing interest rates. it will continue to increase. the bank of japan has said we are not moving at all and mario m.aghi is mm it is moving in three different directions. i do not see any sort of unity here. the united states economy is doing quite well. the japanese economy is basically ok. the european economy is beginning to recover. in terms of the cyclical recovery, the americans are way off the block by a long, long shot. rishaad: usually the case. andrew: they want to be secret nice but no they are not. in china, they flattened out
test 6.7 and it went up -- to 6.7 and that went up. rishaad: come on. strong growth. andrew: that is another argument. i am sorry. i'm not looking at the cyclical recoveries. now i'm talking about the four major markets in the world. this is fact, not opinion. i am not saying in two year's time, this will be happening. it is with a pinch of salt. the interest of the high interest rates in the united states will have very little impact in asia. the notion of that -- rishaad: but there is. economies are tied and wedded to the dollar, ultimately. andrew: good god, no. that implies they have a specific policy but they do not. look at the chinese. s, strengthens, weaken stays flat, then strengthens again. rishaad: one of the big things of course is inflation. i know you have some
controversial views about inflation and whether inflation matters anymore. andrew: i do. not think the concerns about inflation are significantly overstated for two reasons. one reason is we need to have significant moves in the commodities market. in particular, and oil. -- in oil. oil as the source of price increases -- there is a movement from nongreen sources of energy to green sources of energy. fort number two is that inflation to make some difference, it will mean it will be starting and going up from an incredibly low pace. for us to see, historic inflation in the united states are in the european union or in japan for the five and 6% -- 5% or 6%, not our lifetime.
the japanese have been trying desperately for the last five years to get it to 2%. in america, the fed is throwing in the towel. they want to see personal consumer spending, rapid consumer spending going up to 2%. this is not doing it. the same with the european union. actually, the eu keeps inflation. plus. over into 1% not the case of japan. i keep thinking, what is going to make up for all these enormous efforts? pumping money and liquidity and nothing has been happening to inflation. i never believe -- rishaad: as the price has been inflated in the wrong areas. andrew: thank you. we are ready have big inflation. look at the prices of financial assets. i'm sorry, by putting in more money to the economy, that is not necessarily going to make the prices go up. those with equities and bonds, yes it does. rishaad: solar panels and washing machines.
what about them? andrew: this is really 101 case of unintended consequences. again, something like 250,000 people in the united states work on solar panels. take a deep breath. less than 4000 actually make solar panels. of the solar panels installed in the united states are produced in the states. so i do not know where is the threat. the employment aspect of that is overwhelmingly of people making makee frame in which you solar panels. the producers of those frames are pulling their hair out. rishaad: that brings me to the next question. washing machines -- andrew: exactly the same idea. rishaad: that brings me to the next idea. political reasons rather than anything else. andrew: absolutely. they said solar panels and
washing machines. let us kill them. it is completely random. 25% of washing machines are imported. the other 75% are domestic. the domestic ones are going to kill employment because he will put the great, big ones on the component used to make them. the employment of the people making them in the united states, washing machines, will the hit. mr. trump presses a button and kill tens of thousands of jobs. well done. rishaad: i am going to wind you up a little bit and ask you the next question. it is about bitcoin. andrew: there is not a great deal actually. i have given up on that, because i had my say. i think bitcoin on itself is nothing else but a computer entity. that it has no intrinsic value whatsoever. rishaad: neither does gold, you could argue. andrew: there is a huge difference. in the case of gold, i will end up with this. a piece of gold.
in the case of cryptocurrencies, virtually nothing. that is a very significant difference. the other aspect is gold has a huge historic value and also it was used extensively as money. beingitcoin, they are not used as money. they are being traded against the u.s. dollar. hello? they are not being traded against each other. i have done my bit. nothing else to be set. if you want to go in by bitcoin, you are very -- buy bitcoin as an investment, you are very welcome. it does not make any kind of sense. even the sensible of valuations -- given the sensible valuations i have seen about bitcoin for companies i trust, they have gone down. rishaad: it is $11,310. andrew: whatever. fine. rishaad: always a pleasure, andrew. andrew: sorry for talking too much. [laughter]
rishaad: we're back with "bloomberg markets." chinas a boost from with firms racing ahead. over christmas, sales rising 11% ahead of estimates. they were beating forecasts in that period, with the company pointing to rapid gains in asia through last year. starbucks slumping after-hours. underestimates and show
that the u.s. slowdown is going global. the ceo says holiday period was disappointing. china does remain a bright spot. sales climbing 6% there. some sales are threatened by fast food chains pushing lu menus. mcdonald's -- value menus. mcdonald's for one have coffee for two dollars. alaska at u.s. airlines, airlines down 4%. jetblue is there, down 6%. they compound fears as fuel costs go up. alaska and jetblue falling. american airlines seeing fuel increases climbing 24% this year. says gdp ist ceo set to boost travel demands. straight to the premarket. hong kong.
in hong there we go, kong looking toward the icc on victoria harbour. starting down the trading day, four equities and hong kong are theing a move to upside. let to digest. asian stocks are down if you look over the region. trading in australia, it is a national holiday. action on the currency market. donald trump is talking about a daying a strong dollar after treasury secretary steven mnuchin did the reverse and said dollar would be
beneficial for the american economy. the price of oil moving down by 0.5% there. waiting in the moment for industrial profits to come out. up in november, profits were expected, 14.9%. it would give us an idea of what is happening gdp weiss and to what -- wise and to what is happening in the managing industries as well, which at the moment, are showing expansion. let us get over to the open. that's the key here. >> absolutely. the drop we saw in the previous ppi almost telegraphed the drop we saw. it is still growing at 10.8%. 21%aad: profits arising 2
year on year. better than expected. better than 14.9 in november -- 14.9% in november. profits rising 10.8% year on year. i should say in 2017, industrial profits rose 21% year on year. it was weeak for november. david: not a bad year. there is a moderation, 10.8% into the end of last year. in fact, that is the bits if we can zoom in here. what we see here, the last four months ppi peaking. 10.8%. different things affect it but the trends speak for themselves. have a look at that. more dispersion at the asia-pacific. we did have that dip that a lot of people were waiting for yesterday. guess what. there we go. people sleeping in, taking the opportunity to pass up 0.25%.
0.5%.-yen up it is a little weaker today on the rebound of the u.s. dollar. it is having more than an effect here. back of dollarhe strength. that is a story across the bond markets for you. quickly, here are a shares for you. ov gives you a-- mp quick look at the broad-based pickup we are seeing here. only three names are down. the rest up. it is still very early, very here.n the mix you are looking at some of these oil places that have been up substantially in the last few days. giving back some of those games. 35, three, two is your split. air china up. go, quickly, before we we're heading into the weekend. we are on track here for its seventh straight weekly hand.
that matches the street going back to 2014. the period between late may and into early july. now,, a recordt high here for the regional benchmark, roughly speaking. it is up 11% over the course of that period. more to talk about in markets today as we head into the weekend. rishaad: thank you so much, david. three and rate, we have the figure just come through for china. industrial profit that 10.8% year and year for december as opposed to 14.9% for china in november. the whole year has seen 21% growth in industrial profits. greenback is one of the focuses of attention right there. let us get the rest of the first word news. the dollar strengthens after president trump his treasury secretary and said he wanted a strong dollar. mnuchin'sc steve support for a weak currency was
taken out of context and he expects the dollar to rise as the economy grows. trump says he prefers not to discuss currency matters. steve mnuchin has attempted to dollar comments is that sparked concern washington is abandoning its long-standing policy of a strong currency. he says he did not shift his position and he supports a free and floating dollar. he also said the medication is not advocating currency conflict and not deliberately talking the dollar down. highest is at its heigh since late 2014. mario draghi says he expects it to climb. he said there are few chances interest rates will be raised this year. the ecb maintained its pledge to remove stimulus cautiously. they will continue to buy $37 million worth of assets a month until at least september. >> the strong cyclical momentum,
the ongoing reduction of economic slack, and increasing strengthen and for their confidence to inflation. inflation gain of 2%. tom: south korea filed complaints against the united states saying trump violated international rules when he washingtariffs on machines and solar panels. negotiators cannot reach an agreement within 60 days, a dispute panel may be investigated -- asked to investigate the matter. global news 24 hours a day. powered by more than 2,700 journalists and analysts in more than 120 countries. i'm tom mackenzie. this is bloomberg. momentum looking to be intact for these industrial profits figures. 10.8% is the number there for china december year on year.
for january, early ones are we havesales and satellite imagery showing improving manufacturing conditions. let us all of this together. malcolm scott is tracking this. what do we got? malcolm: a good set of numbers into january. we were expecting the official economy, thata's should be under the pmi, as well. there are a couple of interesting tidbits picking up on early indicators. medium-sizedd enterprises maybe a little less optimistic than we have seen in the official pmi reports, where it is really the barge, upstream -- the large, upstream guys leading this recovery. it is the reflation of the economy, it is the production of excess capacity which has allowed those -- rishaad: that happened over some time now, hasn't? -- hasn't it?
malcolm: seems to be and it lasted longer than economists expected. each month, they said the ppi numbers should moderate. they did with the end of the year but not as much of economists expected. back. into this year, it looks like as well. rishaad: overall though, where are we in what you think we will get with regards to a target for growth? we should get that in march, shouldn't we? malcolm: that is right. rishaad: there has been a lot of talk about them not targeting growth and it will be range now rather than definitive numbers. year, beginning of the how much is going to grow and find out that it grows by that at the end of it. malcolm: that is exec we write. officials stepped up an the speculation that there will be no growth target and they are probably will not be again. they think it will be 6.5%, about, at the start giving it a little bit of room for flexibility. last year, it was at 6.5% or
more and of course, they did that. medium exactly the forecast right now of the economies we surveyed. as much as the gdp numbers matter to people, 6.5% is what people are expecting and it is what people expect the government to target. rishaad: malcolm, good stuff. managing editor there. , looking at that industrial profit growth figure if we take the whole -- looking at the industrial profit growth, if we look at the whole number 21%. market complacency despite that, they are saying banks are stronger now. he was speaking in davos and gave us a strategy for the year ahead. have a very clear objective. to make money. i think over that period you mentioned, we definitely have grown that about 3.5 times.
that translates to 9.6% annually. hadsecond year, we also developmental objectives in terms of making sure malaysia moves up the development ladder. we are now a high income country. we announced 6.2% gdp growth, which we believe is commendable. in fact, last your we celebrated our six year anniversary as an independent nation. the growth over that period was also 6.2%. they fully, we have been able to produce a commendable rate of return for the profit level of risk and contribute to the national development. of our about 45% portfolio is outside malaysia. we import them as we grow and develop our p region. >> some reports have suggested
that that would be under pressure to raise the return. are you under pressure? >> the return we believe is more than appropriate. we have outperformed the benchmark we gave. because it is a combination of many things. for example, our growth portfolio are growing more in the mid-teens. we will have a new developmental portfolio that helps develop the economy zones each year to start new industries in malaysia. 9.6%.erage is about we willinding that reinvest our gains into new investments. >> to say you have revised your strategy given the current environment? >> there are difficult changes constantly happening.
it is always about making money. as i said, we grew 3.5 times. do you think you can do better? >> we are still investing for growth. if you know a few years ago, aroundgrowth was technicians. this year, the move is more of the, and clearly -- upbeat. on top of the overall growth situation, this had been --ecasted to the point where we are also position through well in regions. hopefully indonesia, the also have a we ca
major investment area in china, india. we are still investing for growth. we are investing in the transformation of our companies. that was a long-term program that creates a lot of value. we launched last week will be caught transformation 2.0 for malaysian companies. it is stable. we are also seeing investments in the technology sector, so almost embedded -- there is a sovereign venture. in china and san francisco in europe. >> are you confident you are beyond the new normal? year i was.his are in 2018. this is the 10th anniversary of the crisis. certainly, the world has changed. the banks are stronger, the
systems are stronger. i think there is certainly a strong mood. the tailwinds are strong. to the point that we should be thinking about not being complacent. i think we should fix the roof while the sun is shining, and definitely we should. we spent the last 20 years doing this. the 20th anniversary of the asian crisis. we have been building our and have much server companies and a stronger economy. i think from that regard, there is a global recovery that is quite clear. i think there are other issues. for example, the issue of inequality is very much on the davos agenda. on howbeen sharing a lot
the past few years. we prospect of tax reform, tax cuts, and the budget will added at least 0.9% to the gdp this year. we will see it growing three point 25% to three point 5%. it is the largest stimulus in the entire world. the europeans, a year ago and davos, were pessimistic about the future of the europe, the eurozone, will it happen in france. the outcomes are all very favorable. a verye now still aggressive central bank. we will see a europe growing at at least 2.5% over the next 12 months, maybe even higher. and then you have china growing at 6% plus. but nobody wants ever talk about japan, which for 30 years was flat. it is the third-largest economy growing at 1.5%. you add up all the emerging world. we are in a unique position of incredibly synchronized global growth. >> that can last for how long?
>> it will last at least for the next 12 months minus any political disruption. i think they could moderate because i think central banks' behavior will be changing. i think the ecb has more difficult problems than actually the u.s. and our federal reserve, but the federal reserve when i began and we estimate three or four titans over the next year. that modifies some of the growth irma and we will see where it all plays out. subject to some global -- growth, and we will see where it all plays out. subject to a spike in inflation we are not anticipating right now, i think we should anticipate fairly strong economies. >> you hit on the nagging concern. it could be expressed as inflation or as tightening
monetary policy. e possibility the fed and other central banks take the punch bowl away and it does not just moderate growth, it spoils the party? >> i do not see that at this moment. i would also argue we need to define what is good and bad inflation. i would say president trump was a good inflation is rising wages, right? that is what they are trying to do with the tax reform. erik: feels good if your wages are rising, that is for sure. larry: i am not speaking for the federal reserve but if we had a spike in wages that created inflation at 2.5%, is that a problem? i do not think it is. erik: it is only a problem for the fed if you have defined price stability -- larry: at 2%. erik: right. at the same time, looking at 2%
and we have seen a much lower. totality oft the inflation. i think we are still at an incredible point where technology will continue to disrupt and be deflationary. i think one of the bigger issues we have to address -- rishaad: i think one of the biggest issues -- larry: i think one of the biggest issues we have to address is china has been one of the biggest exporter of deflation -- exporter deflation. it means reducing the excess capacity. dold we see in china, and i not think it is 2018, but could we see a china that goes from an exporter of deflation to an exporter of inflation if they do those reforms? there are many things that need to be thought upon and considered, but one thing we do not spend enough time on that i think i harp on it every time i am with you, we do not talk about the pool of money still sitting here.
financialre, our markets are up three times since the financial crisis. three times! and the pool of money sitting in cash worldwide has never been greater. it is a problem. in china, there is 35% of disposable income sitting in a bank account. if you speak to the finance minister of france, 72% of all french savings is a bank account. erik: germany after turning, no interest. larry: imagine the inclusion we would have worldwide if we had better financial literacy, more people investing over the long run. the type of financial gains people would have in their 401(k). i think that is one of the bigger crimes we do not talk about, and that is one of the reasons why i believe we have more momentum because of the pool of money sitting around. rishaad: larry fink speaking
giving aintel is strong cell ballot for the year -- sale outbreak for the year. that forecast coming of the company posted fourth-quarter results, ahead of analyst expectations. our editor at large has the details. >> intel reported fourth-quarter results that the price of the market because they were really good, and good and important areas. -- good in important areas. operating profits of over $5 billion. gross margins, very important,
up over 62%. those are all great. but will is really interesting -- but what was really interesting in the quarter was not the 2% decline in pc sales but the 5 billion plus they sold in data center chips. a 20% year-over-year growth. think about that. it is one of the highest margin businesses intel has, growing suddenly at a 20% clip on a year-over-year basis. it was a job dropping number on wall street. they seem to like bidding the stock up. it was interesting. -- what ith suggest would suggest is the migration of all the companies using computers, all these companies moving stuff from the cloud is happening at a faster pace than it was. it is happening on intel chips. if all the chip buyers a putting the chips to usere that are putting the chips to use to run what services, google's cloud offering, facebook servers, apple servers, they are
all buying intel chips and buying the data center at a faster increasing rate than they have been. that suggests things could be good for intel down the line. the worries about flaws within the chips and problems with security are going to be overshadowed for now with the great results and success they and dataselling chips center chips. internet of things selling chips for cars and refrigerators and everything else under the sun. that was a good business for them. but the real takeaway is data center growth for intel happening at an accelerated pace, making wall street really happy. cory johnson, bloomberg, san francisco. rishaad: coming up, we will be yen to to japan's mr. give us his thoughts on the rhetoric coming out of the swiss city of davos. we will be having a look at the effects from that conclave, if you like.
♪ 10:00 a.m. int hong kong, 9:00 p.m. in new york and washington, d.c. i am rishaad salamat. this is "bloomberg markets: asia." ♪ rishaad: currencies making headlines, the dollar rising on president trump's call for strength in the euro, climbing on the inflation outlook. stalls down as inflation and the japan, 2% seems to be way out of reach. optimistic signals, the oak
economy maintaining momentum, rising 21% last year in china. available at the moment, but how this recent dollar weakness could continue, looking at the bloomberg dollar suggestinglevel 1100. let's take a look at first word news. >> early indicators from china suggest the economy is maintaining momentum. sales managers are upbeat, financial experts optimistic, ery suggestte imagin improvement. rose 21al production percent, the fastest since 2012.
,apan inflation stalled underscoring the challenge for the boj as it attempts to reach its 2% target. with inflation not even halfway there, the view is the boj will keep its stimulus program unchanged. even so, nearly half of economists expect tightening this year. the white house says president trump is prepared to sign an immigration law that would give a pathway to citizenship or 1.8 million immigrants. the white house will cast the offered as a concession to democrats, but the president would ask congress for a $25 billion trust fund to pay for his southern border wall. the u.k. cover meant is saying it -- government is saying it is facing too much turmoil. take says issues are impeding its ability to pass legislation and deal with
challenges at home and abroad. about two thirds of theresa may's ministers have moved jobs since june, but in davos she told bloomberg she is confident. will be ableive we to get a good arrangement for the future, one which is a comprehensive trade agreement u.k. with the european union. the reason i believe we will come to that arrangement is because what i see talking to other leaders is the sense that it will be pragmatic about this and it is to the benefit of the eu and the u.k. >> global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. rishaad: thank you. session, the equity turning positive. , butve gains, some muted the hang seng going great guns,
up 230 points, .7%. looking at the korean index about flat. the nikkei higher. all against these moves, gyrations, for the dollar on the way out as donald trump waded into the public discussion, saying he favors a strong greenback after his treasury secretary endorsed a weaker dollar, saying that was good for thee, all of that sending greenback to the downside. japanese equities slightly higher as the yen is ready much flat as far as that goes, but what about the dollar? where does it go from here? this is a fibonacci look at what is going on. i would do this with our fx rates editor.
we have seen the dollar through 2017 go down considerably. we had gains of the pound 5%. that it has broken a key retracement level and there are not many further places of support as it goes down. major as most oversold well if you look at the relative strength index. let's get a view of what investors are making of the rebound today, but the general trend lower. patricia is with us now. trumpcomments from donald . what are people suggesting will happen next and how are they digesting all of it? >> it is interesting. we spoke to a fund manager about what they made of the comments coming out of dollar. about the currency. -- out of davos about the currency. this is something they are not
consider in terms of investments into currencies. investors still want to sell dollar against major currencies especially, and this is based on the policy convergence theory, whether the ecb or boe, traders are wanting to price and a tighter global interest rate policy these of the the fed. vis-à-vis the fed. them theing opportunity to sell further. the rebound was overdone yesterday. startedhe dollar has coming off this morning across the major currencies. ,ishaad: what about the euro mario draghi talking about that yesterday, going on to suggest a goodg euro would not be
for the economy, so he has to say that, doesn't he? >> mario draghi took a swipe at ,teven mnuchin's remarks and that he should not be coming on the currencies. that's why the imf asked stephen mnuchin to clarify. we have always had that mantra of the strong dollar. as far as the ecb and mario came offhe euro because traders were surprised some people at the ecb wanted to wait until june before deciding what to do in september about the policy, unwinding the policy stimulus. they expect that this decision would come as early as march, but the euro selloff was not that strong and has rebounded this morning. traders are expecting a
tightening, pricing in the tightening a policy, may be next year, will still be the driver for the euro this year. no rate hikes have been priced in, but there is a jump in the march 2019 pricing for the first rate hike, so traders are expecting some normalization of rate pricing, and therefore the euro could gain traction on this. rishaad: thank you so much for that. making heads and ales of what's going on fx wise. declining to comment on the dollar in davos, what mr. yen has to say about all that. next, the potential threats from protectionism. we will look at that with the chief economist as our guest. ♪
warnings at davos about protectionism. expected to push his america first agenda. let's find out the concerns and how they could play out with our next guest, who says the practice of protectionism is on the decline. is it? >> yes. to thousand 17, 4002 protectionist measures, half the number in 2016 and 2015, so -- rishaad: how many globalization measures have you seen in that time? >> we have seen countries like the you can europe going for bilateral trade agreements. it is the first time they are thinking of going back. it is interesting to see in
spite of what we hear that countries have been profiting a lot from the global trade rebound. 2017 was the year of the rebound. been playings have the trade game. some countries are rebounding because of trade. it is really a u.s. story. the u.s. had a big number of protectionist measures last year, especially towards china. the problem is we don't see the elephant in the room, not the president. protectionism is the problem. regulation. are starting on the deregulation agenda now. careful --be very rishaad: what does that mean? >> if you look at the way america in terms of legal system, currency hedged me --
the germany, but the way they do business, they are following the way the sec or fcc rule cases. we have been accepting phone ability by accepting the steps of america. that creates uncertainty for other countries. remember, the first tax bill trump proposed to congress was about taxing foreign companies hurting america. there is an idea that it is not only about goods, services, stephen mnuchin said the dollar has to be week, which triggered mario draghi to say that is not the way we do currency relationships. the part of the iceberg that is more interesting for business. imagine if president trump were to low will -- to lower the capital requirements.
there has been an estimate it would relieve 100 billion dollars of additional dividends for shareholders in the u.s.. it is a big amount. facts, seen in terms of but the rules in terms of territoriality, the way the u.s. is trying to put america forced -- first by using all the weapons they have in their toolbox. europe is trying to so some disagreement. in asia, the lack of coronation is the biggest mistake. rishaad: i want to shift what is happening with trade flows, the sense of where we are in the macro economic cycle. i wanted from the perspective of trade insurance. so you get an idea of how long receipts have been delayed. that gives us an impression of how many policies have been taken out.
give us an idea of confidence more than anything else. , i was in theing public sector. when i went to this company, i did not know what it was, then i realized his company insurers a thousand billion dollars of receivables worldwide. hownted to understand company's behave and trade happens. we see a lot more of these exchanges. what is interesting today his confidence is back. same typeee the of globalization. the first wave was making a cheap. the second wave was about production cheap and changing where people produce stuff. flow,hird wave is digital cash and the data is more important than the physical trade. revolution, which means
trade is not 8% on average. but we see companies innovating the way they trade. rishaad: give me an actual example. >> the supply chain has been shortening. that changes the way companies manage their practices. before they used to have a lot of information on the balance sheets inclines, but they still need to transfer part of the risk to a credit insurance company. hasa in the past six years had 2-3 additional days in paying clients additional. now it is almost 90 days. it is one month more, so that creates a higher risk in terms of payment. are treasury receivable, so it is the heart beat of trade. with digitalization we see a lot of wholesale coming to us.
we see the short-term problems, payment problems. we see insolvencies going up here it we see -- going up. little: we have very time, so where are we? >> high think 2017 was a good year for global trade, 2018 will be a good year also. we are forecasting global growth at 4%, but we have to prepare for this new era. that means to find new growth models. cheap.dy is trying to be rishaad: others are trying to go up the value chain, so there we go. >> if you look at the investment requires, companies have been piling $7 trillion on their balance sheets. there is room for an investment cycle.
we see a lot of companies that to make this price affect and so their goods at high prices, it is hard. rishaad: just reading between the lines, you are suggesting an inflection point? >> the inflection point was 2016. idea thate now is the people believe they have to cater to the middle class and the domestic sectors as they cater to the trade or come up turning point is the de-structuring of the supply chain. that changes world trade. rishaad: great talking to you. i want to draw your attention to .his feature, tv you can watch us live and dive into securities or functions on the bloomberg. this is for bloomberg subscribers only. check it out at tv .
rishaad: getting back to davos, telling us the corporate tax cuts in the u.s. will be good for business, but admitted that banks should be doing better. >> it has a lot of benefits for our industry, a relatively high taxpaying industry, and now we have converged with other countries and widening the base and having a rate that will be a common rate for everybody that equalized the consequences of keeping money overseas versus bringing it home. it has made this system more sensible. we like operating with a sensible system. tax reform, economic growth,
normalized rate environment, deregulation on the way, what will it look like? >> higher. >> by how much. >> as much as we can make it. >> is there a theoretical limit? >> we work against an opportunity set. it depends on where we are in a cycle. higher than they are now. -- we are not going back there because no one would have that leverage. >> what about 15? >> highly possible, but your asking me -- we can't agree on the past. we will not agree on the future. >> you have been peppered with questions about the fixed income business. it had a tough year. it had the toughest fourth quarter since the financial crisis. what is the problem? , this has been a poor
part of the cycle for fixed income. people can quibble how much is cycle and permanent change. we would not extrapolate if it was the most fevers part of the market and extrapolate from that, and we will not extrapolate when you have an absolutely flat yield curve, no volatility, and zero interest rates around the world. i don't think this is the best opportunity set. we probably underperformed, even with the opportunity set we have. is to bring parts. the strategic one is fixed income opportunity, and the second is how well did you execute it. i think we could have executed better. i think we have an appropriate investment.
the market has helped us reduce the opportunity. it is something under 20% of revenue, which is something we try to achieve. we reduced it by driving growth and other businesses, records almost across the board in other segments. in fact notwithstanding a difficult opportunity set, and a difficult year in what historically has been the business we are identified with, we increased revenue and outperform the other segments and even compensated for the fixed income quarter. i don't think it stays that way. for, we get accountable's running the business throughout the cycle. at any given moment we are getting a lot of advice. we take it all into account. our business and commodities business is a jewel. if oils going to stay near the
same price all year, it will not be the golden age of commodity trading. >> execution is a factor, strategy is a factor, talent too. do you have the right people running the business? >> we have the right people running it. >> do you have the right people in place? people have said a lot of things about goldman sachs. i have never heard we lack for talent. >> that is fair. you have explained some of the weakness in fixed income by saying goldman sachs is index to a certain market. what do you mean? >> i'm saying there is an opportunity set. >> doesn't that have to do with the clients you have? >> if the price of oil stays the same or energy stays the same, how much will you spend to hedge your energy risks if you think the price will be the same?
volatility, low it's not just the margins for the business you do are smaller, people do less business. rishaad: goldman sachs ceo lloyd blankfein talking to erik schatzker. thes have a look at business flash headlines and look at what's going on market wise. freeport-mcmoran saying a deal to secure rights in indonesia remains challenging. the country ordered foreign miners to divest majority ownership to local interests. the chief executive says the apparent willingness of the joint venture to give up its share of future production may change the game. chineseg has been told companies and buyout firms have expressed interest in a fromnical drive division
siemens. the company is seeking to streamline operations. unit ands a standalone became one last year. noble making progress on restructuring 3.5 alien dollars of debt, but denies an agreement has been struck. talks inman saying london have been constructive and he hopes to reach a conclusion soon. the highestrisen to since october on the reported deal. news look at some breaking , dell technologies saying it is considering various options, including an initial public offering. that is quite something. dell may choose to list. more on that has weekend it. tokyo and we head to
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your first word headlines. malaysia raised rates for the first time since 2014 with economists expecting no more hikes this year. the overnight policy rate was raised to 3.25% as predicted by a bloomberg survey. growth 5%ment sees this year strengthened by a global trade recovery and rising domestic spending. inflation is building on higher fuel and food costs. the dollar strengthened after president trump said he wants a strong dollar. he said stephen mnuchin's call
for a weaker currency was taken out of confidence and he expected the dollar to rise as the economy grows. the president said he prefers not to discuss currency matters. it should be what it is he added based on the strength of the economy. attended ton has clarify his comments that's part concerned that washington is abandoning the policy of a strong currency. he told a panel and davos he has not shifted his position and supports a free and floating dollar and says the administration is not advocating it and deliberately talking the dollar down. jumped as mario draghi said he expects inflation to climb. as he said mario draghi said there are a few chances interest rates will be raised this year. reiterated it will continue buying assets until at least september. the strong cyclical momentum,
the ongoing reduction of economic slack, and increasing capacity utilization strengthened further our confidence that inflation will converge towards our inflation aim of below but close to 2%. >> global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am yvonne man. this is bloomberg. rishaad: thank you so much. the economists say it is dollars were start to the year since 1987 and could get worse. kathleen hays is in tokyo with our special guest. take it away. absolutely. what a perfect time, yen rising, surging, white house sending mixed messages on the dollar, so who do you call at a time like this? mr. yen, of course.
eisuke sakakibara at the ministry of finance in japan for 25 years and vice minister of finance and helped to guide the yen and the policy through the late 1980's into the 1990's. it is what has earned him that moniker of mr. yen. i want to start on the news of everything out of the white house. the weakchin says dollar is ok, president trump like the strong dollar. who should we be listening to? >> the strong dollar is to the benefit of the u.s., and trump has repeated that, but for the short time in order to reduce deficits, the weak dollar is better. two statements not inconsistent with each other. wasou are somebody who overseeing currency policy at a time when central banks, treasury departments were active in the currency market.
if there is a trend in place, you can push it further. it is hard to create that trend. you think the dollar has peaked and is on a downtrend. why? atthe u.s. has been growing a fairly high rate for some time, and the dollar has been rising, but it will probably peaked somewhere towards the summer or the end of the year. the dollar may start to weaken. net is already happening with regard to the yen. the yen is strengthening vis-à-vis the dollar. i would expect the yen to head towards one dollar 100 towards the end of the year, so the dollar weakens slowly and yen strength and slowly. >> where will the euro be at that point? has beenro
strengthening and pessimism is disappearing somewhat, so the euro continues to slowly strengthen. the trades also tariffs the u.s. has recently imposed. are you concerned about trade friction? i hesitate to say trade war. how does that into into your view of the yen? >> it is difficult for the government to control balance of payments. trumpnderstand that mr. about the u.s. deficit, but the u.s. has been in the position to currentto withstand balance deficits because the u.s. dollar his an international currency. they could take the money and pay whatever, and that has been the case from the u.s. for the
last decades. so i don't think anything fundamental has changed. the u.s. will continue to pay by u.s. dollar. >> does donald trump have a point if the deficit has been around so long? have sayhe country trees don't grow to the sky? maybe there is a time to look at the rules of trade, make sure they are free and working for everybody? of tradeng the rules is fine, but protectionism is something else. >> very good point. , if iout a stronger yen am governor kuroda trying to boost inflation, the stronger the yen gets, the harder my job gets. >> if yen the too strong, it is a problem for the japanese
economy. 105,hing like dollar dollar 100, i don't think it's a major problem for the japanese economy. if it goes to 90 and 80, that is a problem. i am not worried, and i don't think governor kuroda is not worried about this slow appreciation of the currency. >> because japanese exporters are so much more efficient and can compete regardless of the level? >> major japanese corporations do not depend too much on exports because they already manufacturer outside japan. japan,ufacturing outside the strong yen is a plus rather than a minus. wein terms of your forecast, talked about that, but what about normalization? the markets see the ecb picking .p, the japanese tapering
i focus on japan having gone to the boj meeting this week, governor kuroda said no exit. when does he start talking about it? easingill continue monetary policy for a year or two bank. -- two. he may talk about 2-3 years from now, when he might retire. number one you think you will get reappointed? >> he will be reappointed. -- won't served out his whole term? >> after world war ii, the boj governor's, there are only two central governors with a second term, but both retired after 2-3 years, so if he
continues, he will probably retire around 2020. >> that would be a good time to make the policy shift as he leaves. let's turn to asia and emerging-market currencies. willu think the strength continue to drop global investors and more money into the region? ere?here risk th currencyk the chinese will slowly strengthen because china,trade surplus of and it is going to grow, so the chinese currency will probably strengthen, although china's government is trying to stop a rocket rise in the currency. >> they continue to manipulate their exchange rate. >> they have manipulated many things. , ispeaking of china debt that an overblown fear because
people focus on gdp and growth, but people are saying mountains of debt, are you not worried about that? >> i am not worried. >> why? >> it has not caused any major problems up to now. they can control it. want to reducely the deficits, they could take drastic measures. at least for the time being, i am not worried. you still see currency manipulation as an effective broad controlling of exchange rates or something has specific as intervening in currency markets? you are hearing old-fashioned terms like a disorderly decline in the dollar, etc. of course if something really have normal takes place like 1995 when i intervened,
intervention could be effective, but under normal circumstances you should not manipulate the exchange rate. >> you kept us all busy back then. what is the biggest risk right now when you look at japan, currencies broadly? >> you mean about the japanese economy? >> let's keep it there. >> i am somewhat worried about the chinese economy. if the chinese economy starts to , thatome kind of issue will affect the japanese economy. although japan in terms of economy,security and japan and china are close, so you need to watch what happens what happens with the chinese economy closely to predict the future of the chinese economy.
>> thank you for joining us today on bloomberg television. mr. yen, former vice minister of finance in japan, the man who has so much to do with currencies. you recall those days, as i do. rishaad: certainly do. thank you for that. coming up, small is no longer beautiful in chinese markets. of smaller companies are underperforming compared to the big boys. this is bloomberg. ♪
the performance of every division matched or beat forecasts. the company pointing to rapid gains for cosmetics in asia throughout last year. starbucks slumping after sales missed estimates. u.s. slow down for coffee demand is going global. saying thein johnson holiday was disappointing, especially in its domestic market, but china remains a bright spot with sales up. starbucks is threatened by food chains pushing value menus. u.s. airlines having a bad time to adde's carriers plan seating capacity and fears of a fair war as cost of fuel goes up. united andlowing continental and capacity increases.
fuel costs seen climbed 24% this year. the southwest ceo says investors need to calm down with gdp set to boost travel demand. china has been seeking to promote small companies, typically the engines of job growth, while curbing financial risks, but it seems to be hard to do both at the same time. i'm our editor joins us now. it is a conundrum, isn't it? >> that's right. ideally china would like to have a five brent, small private sector. these are the guys who would take on the excess labor as state owned enterprises get consolidated, get restructured, to make them more competitive. need to gors somewhere, and the hope is that or medium-sized companies,
especially in the services sector, feeding that the consumption boom in china, could in and provide new opportunities for people coming into the labor force. that is all well and good, but what china is doing with the deleveraging program is likely to lead to higher funding costs for those same smaller and medium size companies. focuss because a lot of is on the shadow banking system, these wealth management products, the and trusted loans, all of these areas outside the traditional banking system that smaller lenders and non-banks tapping and plowing credit through to the smaller companies. ast will all be compressed policymakers focus on shrinking financial risks. wring out thee to
credit going toward speculation, but is likely to hit the small companies as well. rishaad: i'm just going to bring up a chart, 9335 on the bloomberg terminal. and's,s this to verge something that is patently ,bvious with -- this divergence something that is patently obvious. that ofs also reflect the large companies and contraction for the smaller ones. csi 300 way out performance over the chinext, all being played on markets, is it not? >> that is right. markets like to anticipate things, and indeed we are seeing that. is down 5% chinext over the past three months, and this csi 300 up 10%, so a big diversions here.
people are really anticipating some pain here. it is all a consequence of the lead from the top. china, stateping's owned enterprises, the state, the party, that is what is most important. that message,ear and when they are looking at the choice between lending to a state owned enterprise, a smaller or medium-sized private company, it is a no-brainer. they will go for the state enterprise. out is why we have seen the performance of the small. rishaad: great talking to you as ever. still to calm, the taipei game show. what is in store? about competitive
de-sports as we head towards the whimper -- winter olympics. there is growing momentum for competitive video gaming to be in the olympic games. detailshave all the coming up and set the stage with thousands of gamers camping outside, inside, lots of cos play, including my new friend. it is coming up. ♪
rishaad: the videogame company riotd league of legends, games, says momentum is building for e-sports to be in the olympics. gamesget to the taipei show. tell me about this buzz surrounding competitive gaming. it is huge. >> it is quite a phenomenon here. we came yesterday. there were thousands of young taipei residents, gamers, and viewers outside the convention center waiting to come in, some camping out overnight. here.e the cosplayers if you are not part of this world, it is a different world. makes leaguehich of legends, they say there are more viewers of e-sports in
taiwan than actual participants, and there are lots of participants. the league of legends world championship, 43 million unique viewers, $44 million in prize money last year. e-sports gaining lots of momentum. games had toriot say about the potential for e-sports going into the olympics as early as 2024. are onlylympic sports the older generation will like it. many new categories are coming in. target we want to focus on. >> our video gamers athletes? >> if you ask me, i would say yes. if you have strong mental power, practicing, organization
supporting you, a coach, practicing 16 hours a day. i don't see any difference with other sports. let me give you some perspective on how big e-sports have become. 2020t researchers say by this will be of $5 billion industry, and that is attracting the attention of big corporate sponsors like coca-cola, audi, including mountain dew and others including comcast and asked kennedy. finity. also one of the biggest challenges is cheating, software players can get that can add it manages. doping, if you will. this is what riot games had to say. >> cheating is a serious
problem. it will destroy our ecosystem. we make every effort to get rid of cheating. it is like other sports were used drugs or any other ways of , it will impact integrity and confidence. that is not fair, so we don't like it. we will get rid of it. bad thatng got so about 6% of the registered users and accounts had to be banned because of pervasive cheating in the e-sports arenas, so they need to clean that up. the doping has to go before they can get into competitive olympic competition. rishaad: competitive gaming is so huge now, isn't it? , canan fill up stadia chew, watching people play games? you, watching people
play games? >> i couldn't hear the question, so i will send it back to you. it is quite noisy and quite a spectacle for a 51-year-old like me who used to play pong on his atari. rishaad: i remember those days, pong. space invaders was the game, asteroids as well. anyway, what is going on? who is a bitbody of a legend in the industry? >> mark mobius coming on the show. as thet interview executive chairman of templeton, lots to talk about with him. a lot of pressing issues of the moment, the forex markets, when does this become a problem for a lot of these emerging-market indices? to see that when
you look at these results out of south korea. longer-term, what he thinks are the sort of things to avoid when it comes to china. andan be all good news, whether he thinks they can manage this transition from an export-led to a consumer-led. rishaad: it is happening. we can see evidence. yes, but alsoion, debt problems, and can we trust chinese authorities to manage that and address the underlying problem? rishaad: that is all to come in the next hour. equity markets turning around. we are moving higher. we will leave you with that picture of hong kong. the hang seng up .9%. ♪
>> it is almost 11:00 in hong kong p you are watching us out of sydney. i am david ingles. >> and i am tom mackenzie. welcome to "bloomberg markets: asia." david: currencies are making headlines. the dollar rising on president trump's calls for strength. the euro climbing on the inflation outlook. a second day.ell the 2% target is still way out of reach. david: optimistic signals from china. early data suggests the economy
is maintaining momentum. industrial profits rising 21% last year. that is a key data point we did watch earlier. there are signs of moderation when you look at the leading indicators of profit. it is going to be hard to match. have a look at markets. we are looking at basically flat . we will get you the details in just a moment, but just to preview what is coming up in the program, a big interview coming up. you will not want to miss this exclusive one we have. the last one in fact. emerging markets group executive 10irman, he is coming on minutes from now. stay tuned for that in a few minutes. look at markets across the asia-pacific. we are down in the benchmark. emerging markets -- the euro-dollar is recovering from the drop. mario draghi is in the mix. we are poised on the equity
space for a seventh straight week gain, the longest streak going back to 2014. as you can see, dollar strength. we are getting a pullback in the commodities space led by the likes of -- tom: the dollar, so much a factor in this trade today, and it has been in the last few days. let's check in on the japanese markets now. it has been a pretty choppy day for the nikkei. it is up a little over .1%. of course, we have that cpi data out for japan. the core inflation number pretty much in line with what we got previously, so suggesting the reflation story, still a long way off for japan. it is a dollar story primarily. eventually the cpi data playing into that as well. softness around the end. the kospi picking up as well. the won showing up bit of strength. of course, you have the koreans
saying they will be launching a complaint at the wto with china -- the u.s.. let's get the first word news with debra mao. ra: white house officials say president trump is prepared to sign an immigration law that would give a pathway to immigrants for brought to the u.s. as. we are told the white house will for the democrats. dell is said to be considering various options including an ipo. we are told the board will meet in the next few days to discuss the possibilities and they may decide against any moves at this time. he took his company private in 2013 when he teamed up with silver lake. that led the company operate without the scrutiny.
gearing up for the u.s. debut in los angeles later this year. seeking to challenge alibaba and take on amazon on its home turf. the company is seeking funds to bankroll the bill and support the plan and aims to sell 15% of its logistic arms to send sent and other investors. it will take about a third of the shares in the deal should be completed next month. the u.k. government is being told it is facing too much turbulence and turnover to prepare effectively for brexit. the institute for government think tank says westminster issues are impeding passing legislation and dealing with challenges at home and abroad. two thirds of theresa may's ministers have moved jobs since the election last june. she told bloomberg she is confident. all of these areas, i am positive we will be able to get
a good arrangement for the future, an arrangement which is a comprehensive trade agreement for the united kingdom with the european union. the reason i believe we will be of the come to that arrangement is because what i see talking to other leaders is the sense that we would be pragmatic about this , and because it benefited the e.u. as well as the u.k.. debra: global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am debra mao. this is bloomberg. president trump says he favors a strong currency, which caused the dollar to rise the day after his treasury secretary endorsed a weaker one. it has sparked strong reaction from the ecb and the imf. listen in. >> the exchange rate has moved endogenousause of
reasons, the improvement in the economy. part, for exhaustion us reasons that had to do with communication, but not by the ecb, but by someone else. communication, the someone else communication does not comply with the agreed terms of references. >> we have said in our presentation on monday that the u.s. tax reform is likely to lead to u.s. dollar strengthening in the medium-term. that is our assessment from a macroeconomic point of view. i really hope that secretary mnuchin has a chance to clarify exactly what is said. david: let's discuss this with david trinity in singapore.
u.s.bounce we saw in the dollar, how sustainable is that going forward, do you think? >> no surprise. it did not bounce as high as it mnuchin spoke.sur the trend is still down. the key going forward is the 10 year yield. that can start rising and we get a bit more, that could be dollar supported. with that in mind, everyone a look at the data and the expenditure data out today and next week. tom: we hit our ahead on the ceiling in the 10 year. to watch it. when i look across the major, the other side of the coin, sterling, 143.
i am looking at euro 125. let's tie in what mario draghi said last night and him not directly mentioning the strength in the euro. what do you make of all of that? >> some of it is warranted. the data has been coming out quite strong. people expected him to stay hawkish on the euro. time he spoke, the dollar was trading at the 120 area. he could argue quite easily that at the exchange rate basis, it is stable. against the yen, it is one to go sideways, so you can say it is all in line with tradition going forward, but with the economic data coming out next week, if that comes out strong, you would expect the oil to push up higher to the 125 barrier again. tom: what is the biggest challenge for the eurozone economy in terms of euro strength? the inflationary pressures? the lack of inflation?
or is it the pressure on exports? >> a bit of both. the inflation is picking up. i am sure they would like to pick up a bit more. that is not good from that perspective. it could weigh on inflation. have brexit going on. we are not sure how that is going to play out. it will impact the eurozone. there is risk going forward, but the economy going at the moment is moving on quite nicely. note, i amhat looking across the asian exchange rates right now, in vietnam,hese really some strength coming through. i am surprised we are not getting more policy makers coming out and trying to talk these currencies down. day, in, at the end of the
policymakers can only do something for a certain period of time. against the dollar at the moment is so strong that you are fighting against the tide. if you pick your moment, you want to be careful. big bang for your buck. i think that is the reason why we are saying the markets are dictating. david: speaking of policy makers, governor kuroda is expected to speak at davos. same story. we are nowhere near where the boj wants inflation to be. >> not exactly. the market has been worried about policy normalization lately. slight tweaks to those. governor kuroda was at the boj meeting last week, as dovish as you could be. we are definitely improving, but we are a long way from policy normalization. today's data confirms that. market expectations of how you
make it policy normalization seems to be out of whack with saying. did as you would expect that moving forward from the boj which would weaken the yen. it is so unpopular in the market that it is even by the boj. tom: this dollar story, really posing a challenge for asian central bankers. thank you so much from david in singapore. looking ahead, mark mobius joins us for his last interview as executive chairman of templeton markets group. don't miss that exclusive chat, next. this is bloomberg. ♪
mobius? he is joining us for an exclusive last interview before he retires next week from franklin templeton. fantastic to have you on the show. there's lots we want to talk to you about. here andrt with the now. it the msci emerging markets index is up this year around 5%, but still below the 2007 highs. at what point will it surpass those levels? mark: i think we will see a pretty good market. currencies in emerging markets are getting stronger. that ift of people say commodities go up, emerging markets do well, and commodities are getting stronger. no question about that. a combination of these things make see emerging markets look pretty good now. tom: you touched on the currencies. many would say the rallies we ave seen, that that poses
pressure. at what point do these levels start to become a problem in the u.s. dollar strength? mark: we could probably see another 10% weakening against u.s. dollarlar -- weakening against the currencies. this is not going to have a big impact in many of these countries because what we are seeing is the resurgence of .remendous domestic consumption if you talk about exports, a lot of the exports, particularly from china, are high-tech now. the price is not the only factor anymore. the currency impact which is not going to have a big negative impact on exports and on terrorism either, because people will be visiting thailand, reaching higher and higher numbers. david: the story across emerging-market stocks, for the better part of the last 10 years or so, it has really underperformed. if you have to invested, you almost have no choice to be
invested. the thing is though, with rising rates ahead, how do you hedge? how do you stay long and protect the downside? those don't necessarily coexist well. mark: you have to look very carefully at the earnings momentum of these companies. if the earnings momentum keeps ,p ahead of the interest rates then we are safe. if it does not, then we have got to watch out. i think if you look down the list of emerging-market-leading companies, particularly in the internet space, there is still a lot of growth, room for growth. more importantly, in my view, and the reason why i talk about commodities, is i believe commodities-oriented companies will probably do even better than the high-tech companies, because with the resurgence of commodity prices, they will do much better. and they had been undervalued for so long. david: based on your experience, and you have followed these
emerging markets for a fairly long time. at some point, higher oil starts to hurt some of these markets. at what level do you see this being counterproductive, the rise in the oil price? mark: if it rises, probably above 100, which by the way is not going to be surprising to me. the u.s. dollar you have means to use more dollars to buy a barrel of oil. a lot of people think that oil consumption is going down. it not. if you look at the imports by china, quantity is going up. price may the going down. the value of imports is going down, but the quantities are going up. i believe it is quite possible to have a much higher oil price. highestna is the importer of oil coming into the u.s.. some of your top picks usionally -- can you tell
why, and may breakdown particular sectors in some of those countries that you see the most opportunities? mark: the most opportunities i see right now would be in the commodity area. you have got to look at some countries in alph africa. you have got to look at brazil. you have got to look at some of the latin american countries that have components in their economies, and the other area would be the consumer area because you are getting this resurgence of consumer spending which is really hitting many of these markets. vietnam would be a good example. been making private equity investments in consumer-oriented companies. in turkey, we have an incredible, successful company. david: is that the way to play vietnam, do you feel? the public markets had a stellar 2017. i mean, one would imagine that that is just the start of, you know, this transition from being a frontier to being an emerging market. is it in the private market?
mark: the private market. more importantly, it is going to be state owned enterprises. ahead, you see more state owned companies becoming privatized and some of these companies can be very well once they are privatized. if you look at vietnam not, they have done incredibly well, under terrific management, even though it is the state owned majority. tom: a lot of people have misread the push to reform the soe scepter. about have thought they were .oing to push for reform i'm sure you did not fall into that category. it's not going to happen in china, is it? is,: the interesting thing in china, we have seen an incredible improvement in governance. i remember sitting down -- tom: in the state sector?
mark: sitting down with the chairman and the first thing he said was "i want to apologize for our poor performance. 10 years ago, you would never have heard that, so the attitude is changing a lot in china. now, of course, anybody who wants reform is going to have to really work at it. it's going to take time. you have this bureaucracy. they are really moving ahead on that. tom: the party saying the state owned enterprises have to generate profits this year. david: find a way. mark: exactly. david: -- in order to be profitable? mark: this has been going on for three years or four years now, pushing these companies to reform, and of what, in order to get that, they have to get rid of a lot of the democracy and so forth. you can see more mergers, acquisitions, within the state sector. david: there is a constant debate, and this has gone on for several years, that you cannot bet against the chinese consumer, but perhaps a spanner
in the works could be the death sentence. you could say the chinese consumer wins that. at what point would you say that that issue is starting to drag on on this middle-class? mark: it is already hitting some areas. you are seeing some really bad situations, particularly in individuals getting there. they have not had the experience, and they do not know the concept of compounding interest and what impact it has. so you're going to see that. the interesting thing is the government is recognizing it now, saying we have got to look at this very carefully, not only in the government and the state sector, but we have also got to look at the consumers. so they are beginning to look at this very carefully. some of the internet lending may have been cracking down on, they have gone too far.
overall, the chinese consumer is not as much in debt as the u.s. consumer. they have got a long way. tom: and they won't be for some time. maybe the chinese consumer might be hit and miss as well. these tensions are ratcheting up in the u.s. and china. the ebb and flow, we have add this action from washington. how concerned should we be? is it politicizing the issue? is this a more concerted effort now by the u.s.? mark: we must remember china is not the only target. almost every country in the world is being targeted by the trump administration on trade. i don't think china is going to necessarily be singled out. let's face it. the u.s. and china are joined at the hip in terms of trade. it is two way traffic. a lot of farmers in america depend on chinese exports on agricultural products. tom: those trump understand the complexity of the trade relationship?
mark: he will definitely get the message when congress goes after him saying my constituents have to export to see that. how how would -- david: would you describe how xi jinping has and beijing has taken for donald trump presidency? do you think they have taken -- i don't want to say higher road -- but do you think they have managed to avoid potential confrontation on these fronts? mark: i think they have been very clever all, and have appealed to his ego in a very clever way. they have been good at not confronting him. he may want to confront, but iey have not reacted, and think it has been good the way they have done that. going forward, i think you can see more give and take and behind-the-scenes maneuvering, but the real interesting thing about china is the one belt, one road program because that brings china out, you know, moving into
focus not only in china, but what they are doing outside, and that is really very interesting. tom: when we talk about emerging markets, we necessarily talk about geopolitical risk. administration -- is the u.s. the political risk that have to be factored in? mark: they are creating the risks because they are confronting countries now in various issues. i am saying they are wrong in confronting. it was about time for example that they look at the situation in the middle east in pakistan and so forth and so on. they are beginning to ask tough questions, which i think will be good for everyone, at the end of the day, but it does raise the political temperature, no question about that. david: how long, just generally speaking -- this is a theoretical question. past 30 years has seen a massive amount of growth and wealth creation in china.
do they become a developed economy in the next 30 years, or is this a longer road ahead? mark: next 20 years. they will be moving up very, very quickly, at the rate they are going now. i think the way the party is operating in china is very clever. they are doing the right things. i'm sure they will achieve that. tom: moving back to some of your legacy around the em space, it has changed phenomenally. when you first got involved, there was no internet. i have no idea how you did what you managed to do. ascribe some of the major , somes you have witnessed of the key highs and what you have learned from those? mark: it's incredible. that was it. no internet, no fax, at the havening, so the changes been tremendous, but the real important change has been the
political change. they moved from socialist to ator, governments, market economy model, and that is the most incredible change we have seen globally in every continent, in most every country, and the process is still continuing. there are many that are getting used to the idea that they are not like that anymore. are seeing accelerating in many because of the internet. david: you are retiring next week. if i gave you $100 and absolute read him to invest money anywhere in the world, what is the mark mobius allocation? retiring, i'm going to continue investing. when i'm doing is keeping 20% in cash. markets are high. you may want to take advantage
of the downturn, and then put rest inlf of the emerging markets, generally. and the other half in commodity-oriented companies. tom: one line of advice for a new up-and-coming fund manager? mark: get out and research, do as much research as you can on the streets. just do not sit in front of the screen. you have got to get out and follow up on what the bloomberg is giving you so you get some real understanding of what people are doing and how they are living. david: and of course, not all created markets are equal. mark mobius, the executive chairman at templeton. emerging markets. joining us for his final interview in his current position. fascinating conversation. in a few minutes, we are entering a lunch break. in the japanese
david: it is almost 12:30 in tokyo. in a few moments, we will getting the ocean at the time -- the open up a cash markets. yes, coming off some strength in the japanese -- in the u.s. dollar. we are seeing that reversed into a few hours before the markets in europe. tom: here in hong kong, a gray, foggy day in the city. the hang seng has gains up around 1%. a bit of a choppy day for trading in hong kong. i am tom mackenzie. david: and i am david ingles. is it fog?
i kind of hope it is. let's get you a quick check of your first word headlines. here's debra mao. the dollar strengthened after president trump contradicted his treasury secretary and said he wants a strong dollar. he told cnbc that steven mnuchin -- current support was taken out of context and he expect the dollar to rise as the economy grows. the president said he prefers not to discuss currency matters. "it should be what it is," he added "based on the strength of the country." steven mnuchin wanted to strengthen his comments. panel in davos that he has not shifted his position and he supports a free and floating dollar. he said the administration is not advocating currency conflicts and is not deliberately talking the dollar down. told the worlds
economic forum that the trump administration is a danger to the world. he said the president is risking war with north korea and must accepted as a nuclear power and then cooperate and negotiate. soros says he is expecting a democratic landslide in the midterm elections and the trump administration will be gone in 2020. clearly, i consider the trump administration a danger to the world, but i regard it as a purely temporary phenomenon that will disappear in 2020 or even sooner. debra: south korea has filed a complaint against the united states, claiming the trump administration violated international rules when it arrifs. t if negotiators cannot reach an agreement, a wto dispute panel may be asked to investigate the matter.
powered by more than 2700 journalists and analysts in more than 120 countries. i am debra mao. this is bloomberg. tom: deborah, thank you. let's check in on the markets. china heads into the lunch break. yes, you forgot the most important market out of action for australia day. it is looking pretty flat with the nikkei coming back online fairly unchanged, but have a look at the rally you are seeing in the chinese markets. the rally had to and at some point, but it is coming back again today. each share index. chinese shares listed in hong kong, up 1.7%, reversing the losses from yesterday and just continuing on the tear we have seen. a little bit of weakness coming through in new zealand. seeing some weakness from the tech players. disappointing earnings in korea. the taiex and taipei down.
despite the earnings in korea, the kospi is holding its ground, up by .2%. the regional index is falling .1ay, down by around percent. weakness coming through in the commodities space as well. off by 1% and the pickup and gold showing you investors are pushing into some of those more safe assets. soaringtailers in korea quite strongly on a plan to up their online business. it has been coming back after a big selloff yesterday. the index getting a solid boost. to the downside, weakness coming through for the energy players. i mentioned that coming through in korea. sparing a number of
downgrades. when you look at the regional index as a whole, a little bit of a dipped out of the energy sector. that rallied very strongly yesterday, but oil is pairing the weekly gain. the i.t. sector as a whole is off by .4%. supported by the big names. you are seeing those key players in taiwan coming under pressure. david: you talked about some of these earnings coming through in south korea and obviously some of the your drags pulling the index down. concept ofme to this how strong these currencies are and whether or not it is really becoming a problem. where are we now in the currency space? it does not seem to be lasting very long. a lot of these companies, particularly in south
korea, have come out saying the strength of the won has hurt them. it is coming under pressure. the worst performing currency down .1%. -- .5 percent. commentary from the south korean government that they had to look at excessive moves. up by .3%. it hit the four-year high yesterday and we have some numbers coming through out of thailand today as well. that is foreign reserve data. it has been up for seven consecutive sessions. the malaysian ringgit a boost. a lot of analysts saying the bank of malaysia does not have to do anything for the rest of the year. the downside, your peso is looking cheaper if you head up to manila and watching the chinese renminbi as well. the best week in three months, coming under a little bit of pressure.
tom: thank you very much. sticking with china, profit slowed for a third month after factory inflation decelerated to the weakest pace in more than a year. industrial profits rose 10.8 percent in december from 14.9% in november, and we have a terminal chart. 90 45 is on david's set up. we can see that the green bars are showing the industrial profits in the positive, starting to a touchdown now. the key question is how much of a concern is that, particularly when the country is trying to deleverage how industrials will be under china as they focus on cracking down on pollution. from jeffmore on this black, who joins us from shanghai. what should we read into this latest set of data out of china? we should read into it that
good things do not go on forever. profits urge you pointed to is also off the back of producer price inflation. that has been going on for the best part of two years now. its peak.obably past a lot of other drivers in the economy, and the question is how much momentum from the fourth quarter we have seen and the expectation, 2017, is going to carry through to this year. year, weeaking of this have pmi data coming out, i believe, next week. we are getting early indicators that we might see maybe a slight pickup, but it will not be falling off a cliff. what are your thoughts on trying to balance out how we deal with that coming out of 2017 and the state of the economy right now?
economists are forecasting is stability at this point in the first quarter. the forecast is pretty much even both on the services side, the increasingly important services manufacturing.e we have got a lot of different things going on in the economy. still pretty good trade data, which is a big support. we see how long that continues given the current rhetoric, but this year, we are expecting tighter monetary policy on balance, and we are expecting various different areas in upstream industries. that is still going on. the question is how much -- where the balance is found amongst all of these factors, and judging by the forecast right now, it is coming down more or less stable. referencee just
this chart for our viewers. it is showing some of the pressures they are under in terms of access to credit. pmi.urple line is the the white line is a small company, diverging particularly from the month of december into january and below that, you have the small companies index, versus the larger firms. i guess the question is in terms of credit for smaller business in china is how much tougher is it going to be going forward through this year? >> you have picked out a good point because that has been a theme we have been seeing again and again the last few months in the pmi, in other anecdotal data in the industrial profits, and it does seem that there is a certain line of consolidation going on in various sectors for the big players in
state-controlled players. there is no problem about getting credit. as the shadow banking sector and slightly more peripheral bits of china's funding mechanism feel the pressure, it could be the small guys that continue to suffer. that is very true. tom: excellent stuff. we will be watching this going forward. bloomberg's greater china editor joining us from shanghai. at the largestok economy. the economy looks to have wrapped up its longest stretch. the question now, can it keep up? that performance we have seen so far. let's bring in kathleen hays. what can we expect from the gdp report that comes out later today? growth trifecta.
that is what we are looking for. let's take up a chart. #btv 9372. the forecast, the advanced look at fourth-quarter growth, is for 3%. it was preceded by a quarter of 3.2% growth and 3.1% in the third quarter, so three in a row would look pretty good, wouldn't it? here is the issue. housing rebound, all driving things now. the question is, can it continue? tax cuts bolstering expectations for a boom. saw the week weight gain. a federal said to raise rates three times this year. is risingght -- debt and casting a cloud over the consumer. not that it is going to have a drastic slowdown. this cannot happen is what the argument is. here we go. boj, ecb, they are meeting.
no press conference, the closely watched and so many transitions are happening now at the fed. focus tos switch japan. consumer prices kept rising in december. theess the question is is inflation glass half-full or half-empty? kathleen: you know, right at half. it's true. in terms of accelerating the cpi rate, it did stall out last month, but it did not actually slowdown. the year-over-year rate for the core cpi in japan, which is the overall number, 0.9 for the second month in a row. the headline number jumped from 0.6 to just 1% on higher oil prices. you take out energy and food, and then you have 0.2% and staying there. where do we go next?
i want to quickly show a chart just to illustrate what i was just talking about, the 7942 on your bloomberg. the most important line of course is the mine across the top, to present. a long way away from that and a good way to go. i have to get right to it. did, the former vice minister of finance in japan, i asked him so many questions, particularly about the yen, which he already forecast. dollar-yen at 110. that was back in september. he still thinks it is going to 105. 100.ually, it will hit how about trying to hit inflation if you are the boj? he said it would have to get into the 90's. they can handle that. will is slow down the road is passport normalization? he said that will not happen for a while.
he thinks governor kuroda will get reappointed, but not serve out his full term, and then maybe we will see the normalization. let's listen to what he says. it will continue the monetary policy for a year or two, and he may start to talk about, say, two years, three years from now. that is a time he might retire. you know, it seems like a logical plan to me because if kuroda is reappointed , he says there have been to other boj members who only served to years to three years of their term. it would be a transition not just in terms of him leaving, but in terms of his they transition when the boj says we can see the exit door, here is what it is going to look like. it was a very interesting -- as always, a good conversation. david: kathleen, thank you so
tom: welcome back. in the is commerce minister said he would welcome apple in india and hopes can manufacture devices there. at davos, he said there is a huge investment pipeline in india. >> that is what i am telling all the foreign investors. just do it. there is a big market in india. there is the equal system-level because nowadays, manufacturing is going to be very high-tech, which would use technologies in a big way. we have a huge level.
why is an apple doing it yet? what is delaying the plan? when will it happen? we started arguing for it only two years ago. we are already seeing a huge investment in the pipeline. companies are coming. i was us tell you something interesting. them,p companies, most of have their offices in india. they realize there is manpower. you can do certain development for manufacturing. india.created in why do you think global companies are doing it?
>> is there a timeline when apple can start manufacturing in india? what can you tell apple right now? >> i'm saying i want not just one apple. apple's to come to india so that they can set up the many fracturing. we are very happy to welcome any many fracturing in india. we are removing all the hurdles into foreign investment. creating the initial corridors where anyone who wants to come and start manufacturing, we will earmark a special place for them. apple is always welcome. we keep all the doctors away. that was the indian minister of commerce speaking to haslinda amin in davos. david: coming up here on the
tom: the videogame company behind the hugely popular legal legends title, right games, says momentum is billed -- riot games, says there is movement for you sports to be at the olympics. what is the buzz about competitive gaming? it is all about competitive sports. the taiwanese among what the south koreans, the chinese, and a little less or
perspective. they are in the eastport, and 80% of these viewers are asian. games, the riot maker of legal legends, the biggest world championship of e-sports, he says the reason 8% of the players and audience are in asia could be the impetus for the international olympic committee to include e sports in the olympics as early as 2024. this is what he has to say. >> you see viewership is declining. many new categories are coming in. is in focus. >> our videogame as athletes? >> if you ask me, i would say yes. you have the very strong mental
practicing, people supporting you, a coach, , training 16 hours a day. i don't see any difference from any other athlete. >> it can really tell the size of the business of this. it is a market researcher. is they, in asia, there potential for $5 billion globally of revenue in e-sports by 2020. ,ake a look at the demographic of course, mostly between 13-year-olds and 35-year-olds, and this has been a steady stream of gamers and also viewers coming into this convention center, 9:30 this morning, and the line continues on outside and into the square.
thousands and thousands and thousands of people, and that is why you are seeing big, corporate sponsors i can tell, like coca-cola, like audi, like airbus, mountain dew, a number of companies, signing onto e-sports, and ac the potential, especially in asia. with the next three olympics and asia in south korea, tokyo in 2020, and beijing in 2022. there could be grounds all of momentum for the possible inclusion of e-sports. are they athletes? i will leave that up to the viewers to decide. [laughter] david: tell us more about what is going on at the game show. of course. we cannot even get to a lot of the games. the crowds are so thick. what we have seen is a lot of cosplay. part of this business is the fun of role-playing and getting dressed up. it is not just about playing
video games. it is about watching videogames. i do not know if you remember, a decade or so ago, a lot of people said online gambling, blackjack in casinos, that would never be a spectator sport. guess what? a multibillion dollar business as well on television. that is what a lot of games companies want to see, the same thing happen on the mass scale. david: steve, thank you. stephen engle. stronger, higher, faster. tom: it's all about strong thumbs. and internet connection. get you a quick check of your business flash headlines. walmart has forged another alliance with -- in its battle with amazon, partnering with record time to improve -- raku tan. it will bring the e-book catalog
to walmart later this year plus a revamp of the company's food operation. that will roll out in the third quarter. shares rose sharply. the best quarterly profits since 2014, but efforts to secure long-term mining rights in indonesia remains challenging. indonesia last year ordered foreign minors to divest ownership to interests. the ceo said the apparent willingness of joint venture partner rio tinto to give up its share of future production may change the game. david: lambert has been told to chinese companies have expressed interest in mechanical drive units. sources say a lender could raise $1.2 billion as the biggest engineering company seeks to streamline operations. .iemens made a satellite unit quite a week.
alisa: i'm a alisa parenti in washington, and you're watching "bloomberg technology." let us start with a check of your first word news. president trump will cut off funding to the palestinians unless they agree to peace talks. speaking with the israeli prime minister in davos, president trump said palestinian leaders disrespected the united states by refusing to meet with vice president pence. during his middle east trip last weekend. president trump also denies he and theresa may don't get along. he met with the u.k. prime minister today. trump says the u.k. and u.s. share similar ideals. the british government also confirmed president trump will visit the u.k. this year, but did not provide a specific date.